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Smart cards to drive e-commerce

VeriFone's CEO predicts that smart cards and e-commerce will fundamentally change the way consumers spend their money.

SAN FRANCISCO--Hours after his shareholders approved the acquisition of his company by Hewlett-Packard (HWP), VeriFone chief executive Hatim Tyajbi predicted that together Internet commerce and smart cards will fundamentally change the way consumers spend their money.

"Electronic commerce is ready to explode," said Tyajbi, who becomes an HP executive vice president and will continue to run VeriFone as a separate subsidiary. "There is a convergence between Internet technology and smart card technology. We believe that smart cards and electronic purse schemes [for Net-based commerce] will truly change the way people live."

In five to seven years, smart cards will be pervasive in the United States, said Tyajbi, who is making consumer use of smart cards a key thrust of VeriFone's strategy.

Electronic cash, stowed on smart cards in what is known as "stored value," will be one driver of U.S. consumer acceptance of smart cards, he said. Loyalty programs--in which vendors such as airlines award points toward rewards for frequent customers--will be the other.

However, at least in the United States, e-cash trials of smart cards are closer to happening than similar efforts for loyalty programs. Tyajbi noted that 87 percent of all transactions are handled in cash, usually for less than $20, leaving room for smart card schemes for e-cash to grab market share.

"Our dream is that the ATM (automated teller machine) goes away or moves into the home," the VeriFone executive said. Last fall the company announced an initiative to get its Personal ATM devices into homes and a complementary strategy of getting neighborhood merchants in specific areas to upgrade their credit card swipe machines--which are VeriFone's main business--to handle smart cards with e-cash too.

With its new HP ownership, VeriFone is packaging itself as a "solutions" company that can provide hardware, software, and services to help banks and credit card processing firms expand their roles in electronic payments.

"We now have the ability to offer integrated payment solutions that nobody [else] in world can offer," said Tyajbi. "We aim to become the dominant payment-solution provider. This position is ours to lose."